Tax residency in Croatia is based on two factors: physical presence or accommodation availability. If you are in Croatia for more than 183 days a year (this can overlap calendar years), then you become a tax resident. If you have a Croatian residence at your exclusive disposal for 183 days or more (can also overlap), you also become a tax resident.
If either of these conditions apply to you, then you are expected to pay taxes to the Croatian state. However, only income generated in the country or by a Croatian company can be taxed by the Croatian government.
Income tax rate is progressive with a rate of 15% to 45% (2010). If you are originally employed outside Croatia and are working in the country under a contract for a determined period of time, you may be exempt from paying taxes if Croatia has signed an agreement with your home country.
Croatia has standing agreements with the following countries regarding both income and capital tax: Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, the Czech Republic, Denmark, Finland, Germany, Greece, Hungary, Iran, Ireland, Israel, Italy, Korea, Macedonia, Moldova, Montenegro,The Netherlands, Norway, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine, United Kingdom.
Exempt from income tax only: Chile, China, Estonia, France, Jordan, Latvia, Lithuania, Malaysia, Malta, Mauritius, San Marino, South Africa and Turkey.
Taxes levied by the state
The Croatia state levies many different taxes such as:
- Value Added Tax (VAT) of 0, 10 or 23% depending on the product
- Corporate income tax (also known as profit tax) of 20%
- Special tax on salaries and pensions of 2 or 4%
- Special tax on receipts from personal activities of 2 or 4 % depending on the activity
- Special tax on passenger cars and motor vehicles calculated progressively depending on the price of purchase (with a minimum of 13%)
- Special tax on luxury products of 30% of the net price of the product (without VAT)
- Road vehicle insurance of 25% of the insurance premium
Taxes levied by counties and cities
Counties and cities are also allowed to levy taxes, for example:
- Inheritance and gifts tax of 5%
- Road motor vehicles tax and vessels tax ranked progressively depending on the engine size and age of the vehicle
- Surtax on income tax, progressive depending on the size of the county (10% for the smallest and up to 30% for the capital city)
Besides income tax, jointly-levied taxes include real estate transfer tax, which is 5% of the property value.